![Man and woman looking at laptop and pointing at the screen](http://amanbank-f0f5.kxcdn.com/cdn/ff/HDh_tYRXqwgM_qdQekphLQ3_8U-cPd1VW3nZIdP4A44/1591626954/public/styles/banner_mobile_1x_375x120/public/2020-02/ab-personal-services-internetbanking-header.jpg?h=86809ad4&itok=9sdXb24M)
What is Ijarah?
Ijarah is an Arabic word that means “to give something on rent”.
Under the concept of Ijarah in Islamic banking, a customer can use an asset or equipment, which is owned by an Islamic bank, for a fixed period against a fixed price. Al Ijara is very similar to a leasing contract, and the asset under the Ijarah contract could be a car, home, plant, or a machinery. Financing Concept: Transferring the usufruct of an asset but not its ownership.
- Bank transfers the usufruct to the client for an agreed period at an agreed consideration (rentals)
- The asset under Ijarah should be non-perishable, non-consumable
- Asset which do not maintain their corpus during their use cannot become the subject matter of Ijarah, for instance money, commodities etc
- Types of Ijarah financing:
- Operating Ijarah: standard Ijarah (leasing) agreement
- Ijarah thumma al bai: lease and buyback agreement
- Ijarah-Wal-Iqtina: lease and unilateral undertaking to transfer ownership
![Man signing contract](http://amanbank-f0f5.kxcdn.com/cdn/ff/wLYQmXuVY69EmUQR_eceEKCuZnVwUCgY5JT8NcRthV0/1591626954/public/styles/hero_mobile_1x_345x195/public/2020-04/ab-islamicbanking-ijarah-hero.jpg?h=c6980913&itok=IDgKNKrz)